Reebok 2008 Annual Report Download - page 110

106 Group Management Report – Our Financial Year Business Performance by Segment — TaylorMade-adidas Golf Business Performance — Risk and Opportunity Report
2008 TaylorMade-adidas Golf net sales by region
North America 50% Latin America 1%
Europe 12%
Asia 37%
TaylorMade-adidas Golf gross margin by quarter
in %
Q1 2007
Q1 2008
43.9
46.6
Q2 2007
Q2 2008
44.7
46.4
Q3 2007
Q3 2008
44.3
42.9
Q4 2007
Q4 2008
46.0
41.0
TaylorMade-adidas Golf operating profi t by quarter
€ in millions
Q1 2007
Q1 2008
(1)
23
Q2 2007
Q2 2008
27
19
Q3 2007
Q3 2008
15
11
Q4 2007
Q4 2008
24
24
Currency-neutral revenues grow at double-digit
rates in almost all regions
TaylorMade-adidas Golf currency-neutral sales grew in all
regions in 2008. Sales in Europe increased 17% on a currency-
neutral basis, driven by double-digit growth in all major coun-
tries, in particular in the UK. In North America, sales increased
3% on a currency-neutral basis, due to growth in both the USA
and Canada. TaylorMade-adidas Golf sales in Asia increased
10% on a currency-neutral basis, driven by double-digit growth
in Japan, China and South Korea. In Latin America, currency-
neutral sales grew 38%, driven by double-digit growth in all
major countries.
Currency translation effects negatively impacted segment rev-
enues in euro terms. In euro terms, sales in Europe remained
stable at € 95 million (2007: € 95 million). Revenues in North
America decreased 4% to € 405 million in 2008 from € 422 mil-
lion in 2007. In Asia, sales grew 8% to € 305 million in 2008
(2007: € 282 million), and in Latin America revenues increased
28% to € 7 million in 2008 (2007: € 6 million).
Gross margin decreases to 44.3%
TaylorMade-adidas Golf gross margin decreased 0.5 percent-
age points to 44.3% in 2008 (2007: 44.7%). This development
was below Management’s initial expectation of a gross margin
improvement. The decrease was mainly due to lower metal-
wood margins as a result of the promotional environment
in this category, in particular in the second half of the year.
However, this was partly offset by a strong increase in golf ball
margins. Gross profi t remained almost stable at € 359 million
(2007: € 360 million).
Royalty and commission expenses increase 13%
Royalty and commission expenses at TaylorMade-adidas Golf
increased 13% to € 20 million in 2008 (2007: € 18 million). This
development was driven by higher adidas Golf sales, which
generated higher intra-Group royalties paid to the adidas
segment.
Net other operating expenses and income decrease
Net other operating expenses and income as a percentage of
sales at TaylorMade-adidas Golf decreased 2.3 percentage
points to 32.1% in 2008 from 34.4% in 2007. This improvement
was mainly due to one-time book gains of € 21 million from
the acquisition of Ashworth and € 5 million from the divestiture
of the Maxfl i business. In absolute terms, net other operating
expenses and income decreased 6% to € 261 million in 2008
from € 277 million in 2007.
Operating margin expands by 1.5 percentage points
The TaylorMade-adidas Golf operating margin increased
1.5 percentage points to 9.6% in 2008 from 8.1% in 2007. This
development was in line with Management’s initial expectation
of an operating margin improvement. This is mainly a result
of lower net other operating expenses and income as a per-
centage of sales which more than compensated for the gross
margin decline. Consequently, operating profi t for TaylorMade-
adidas Golf increased 20% to € 78 million in 2008 versus
€ 65 million in 2007.